Statement For Calculating Fund From Operations

Particulars Amount
Net profit for the year
(+) Appropriations
Preliminary exp. Written off 10000
Goodwill Written off. 5000
Provision for tax 5000
(+) Non cash expenses/Non Business Loss
Depreciation on Machinery 5000
Loss on sale of plant 2000
(-) Non Business Income
Profit on Sale of Building 5000
18000


(+) 20000


(+) 7000


(-) 5000
Fund From Operations 40000

















NEED AND IMPORTANCE AND SIGNIFICANCE OR ROLE OF MANAGEMENT ACCOUNTING
In the present complex business world, management accounting has
become an integral part and useful tool of management system. In fact, the reports prepared
and data edited on the basis of management accounting become the foundation of
successful operation of managerial activities. Management accounting not only increases
efficiency of the management, it also improves the efficiency of employees. The need or
importance of management accounting as a tool of management can be studied under
following headings:
1. Increase in Efficiency :
Management accounting increases efficiency of various business
activities. The targets of different departments are fixed in advance on the basis of
forecasting and planning and later on actual performances is compared with them. This
process helps in measuring and increasing the efficiency of enterprise. Moreover, it also
encourages the optimum use of capacity of men and machines engaged in the concern.

2. Proper Planning :
Planning is a primary function of management and management
accounting has an important role in making it proper. Management is able to plan various
activities with the help of accounting information. In this context separate budgets are
prepared for each department and then a master budget is prepared for the whole
organization. On the basis of information provided by management accountant , the work
load of each and every individual is fixed in advance and the activities of the concern are
planned in a systematic manner.

3. Measurement of Performance :
Management accounting also plays and important role in
measurement and management of work performance through the techniques of standard
costing and budgetary control. In standard costing, standards of costs are determined and
then by comparing them with actual cost the favourable or unfavourable situation of
efficiency can be determined. Similarly budgetary control system also helps in measuring the
work performance.


4. Effective Management Control :
Efficiency of management depends upon its effective control and
from this point of view also management accounting has its specific role. Nowadays the
function of control has become a continuous process. In this context it is necessary that
complete and detail information in respect of the execution of every aspect of business
should be collected. Thereafter, it should be properly edited and analysed and
management accounting can render valuable service in this respect.

5. Improved Services to Customers :
The installation of various types of control through management
accounting leads to reduction in cost and price and maintenance of standard level of
quality of goods produced and services rendered. Moreover, efforts are made to achieve
production targets. All this results in improved services to customers.

6. Maximising Profits :
The thrust of various techniques of management accounting is to
control cost of production and to increase operational efficiency. It all results in
maximizing the profits.

7. Prompt and Correct Decisions :
Management accounting provides continuous information and
analysis to various levels of management in respect of various aspects of business
operations. It helps in prompt and correct decisions by management.

8. Reduction in Business Risks :
The collection and analysis of historical information in management
accounting provides knowledge to the management in respect of nature of fluctuations
and their causes and effects. On his basis management can prepare such plans which may
minimize the impact of trade cycle or seasonal fluctuations and consequently reduction in
various types of business risks.
In brief management accounting represents a happy blending of two older
professions of Management and Accounting, which leads to success of a business concern
through accounting control and managerial efficiency.

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